Earnings Beat Markets' Expectations as Economic Data Proves to be Mixed

Earnings Beat Markets' Expectations as Economic Data Proves to be Mixed!

Conditions in the world's largest economy seems to be improving as the recession continues to ease apparently, however price pressures seem to have increased amid rising energy prices, moreover, companies continue to surprise markets with better than expected earnings.

The U.S. Commerce Department released today the producer price index for the month of June, PPI rose to 1.8% in June double markets' expectations and up from 0.2% in the prior month, while compared with a year earlier PPI declined by 4.6% higher than the prior and expected -5.0% and -5.2% estimates respectively.

Meanwhile core PPI which excludes food and energy prices rose in June by 0.5% higher than the prior drop of -0.1% and the expected 0.1% rise, while compared with a year earlier core PPI rose by 3.3% more than expected and up from the prior rise of 3.0%.

Rising energy prices continue to ignite price pressures, despite rising spare capacity amid the ongoing recession, however core inflation remains under control and accordingly the Federal Reserve Bank won't be too concerned with the rise in PPI unless it was further confirmed by the CPI and the PCE.

Inflation is expected to rise over the long term, as the huge amounts of liquidity that were pumped into the financial system will surely raise inflation, however the Fed is working right now on preparing an exit plan that can help withdraw the huge amounts of liquidity without sacrificing economic growth.

Moreover, the U.S. released the retail sales for the month of June, retail sales rose by 0.6% better than the prior revised rise of 0.5% and the 0.4% expected rise, while retail sales that exclude autos rose in June by 0.3% less than the prior revised rise of 0.4% and the expected 0.5% rise.

The rise in retail sales was highly attributed to the rise in gasoline stations sales after rising 5.0%, while the rise itself is due to the fact that gasoline prices continue to rise in June and accordingly investors shouldn't put too much hope on today's rise, especially as the excluding autos retail sales rose less than expected.

However that does indicate that consumer spending is stabilizing at least, and that could prove to be vital for any upcoming recovery, though we still believe that rising unemployment will continue to weigh down on economic growth over the course of this year at least.

Meanwhile, Goldman Sachs Group reported its results for the second quarter of 2009, as Goldman Sachs reported net income of $3.44 billion or $4.93 a share up from $4.58 a share reported a year earlier, after reporting net revenue of $13.76 billion, in which equity underwriting produced a record $6.80 billion of revenue.

Goldman's CEO Lloyd C. Blankfein said that markets are still fragile and that they continue to face challenges amid the ongoing economic weakness, however the results reflected better conditions in financial markets.

Also Johnson & Johnson reported its earnings for the second quarter of this year, as net earnings were $3.2 billion or $1.15 a share, though sales declined by 7.4% to $15.2 billion, while the company expects earnings for the full-year of 2009 to reach a target between $4.45-$4.55 a share.